Citi Private Bank

Our website no longer supports your current web browser version, which means you are no longer able to access this website. Please update your browser to continue.

System Outage
Citi Private Bank logo

Language Notification

Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

Por favor, tenga en cuenta que es posible que las comunicaciones futuras del banco, ya sean verbales o escritas, sean únicamente en inglés. Estas comunicaciones podrían incluir, entre otras, contratos de cuentas, estados de cuenta y divulgaciones, así como cambios en términos o cargos o cualquier tipo de servicio para su cuenta.

Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

Por favor, tenga en cuenta que es posible que las comunicaciones futuras del banco, ya sean verbales o escritas, sean únicamente en inglés. Estas comunicaciones podrían incluir, entre otras, contratos de cuentas, estados de cuenta y divulgaciones, así como cambios en términos o cargos o cualquier tipo de servicio para su cuenta.

Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

How-were-positioning-portfolios-in-these-uncertain-times

How we’re positioning portfolios in these uncertain times

Steven Wieting

By Steven Wieting

Chief Investment Strategist and Chief Economist

December 7, 2018Posted InInvestments and Investment Strategy

Just ahead of critical meetings of global policy makers and key political decisions, the Citi Private Bank Global Investment Committee kept its asset allocation unchanged on the 28 November.

Global equities remain 1% overweight while global fixed income remains underweight by 1%. (Significant underweights in European and Japanese bonds comprise the fixed income underweight). Relatively high levels of implied volatility across most global asset classes suggests significant stress and uncertainty. Away from severe economic downturns, this typically precedes market recoveries.

World equity markets - including the US - have seen valuations fall about 15% in 2018 on the combination of rising corporate earnings and weak share prices. Tightening monetary policy from the US Federal Reserve and other central banks is partly responsible, and we indeed expect this to result in marginal slowing for the US and world economies in 2019.

However, we also believe global share prices have been weakened by 5%- 10% on the risk to corporate profits from tariffs and trade friction. This can be seen in the relative performance of firms directly impacted by the tariffs, those that may be harmed in tariff retaliation, and in the prices of particular commodities sensitive to shifting trade flows. As such, we would expect a large reaction to trade negotiations between the US and China at the coming G20 event on 29/30 November, consistent with patterns seen in the past 9 months.

As noted, we believe there is significant apprehension over the negative impact of tariffs and trade dislocations priced into markets. We see this as asymmetrically priced, with a large positive response likely in the event that new trade deals end the threat of disruptions. However, we would not expect any swift closure of all trade issues in any region.

As also noted, markets across all asset classes and regions have seen weakness and volatility in the past month. This is quite different from the experience of the correction during the first quarter of the year, which was isolated to equities. The very recent 30% drop in the price of oil - following a sharp earlier rise - has affected energy-related credit markets. Geopolitical issues, while always important, stand as a particularly strong driver of supply uncertainties at present. Key meetings including an OPEC decision on 6 December, could result in a large move in petroleum, consistent with the historically high level of option implied volatility in the commodity at present.

With the oil price drop along with some significant idiosyncratic credit events, global credit yields have risen, creating additional return competition for equities. Yields above 7% for sub-investment grade bonds are now more compelling, particularly as we see corporate profits still positing a broad based, albeit smaller, gain in 2019. Credit defaults in the year ahead should remain subdued. Nonetheless, our US credit overweights remain larger in higher quality short-duration credit, with a preference for floating rate debt. Across maturities, municipal bonds remain a standout yield opportunity for US-taxed investors.

We continue to expect a recovery in global equities in the coming year. The longer-term return opportunities seem strongest in a variety of international markets, with substantially lower valuations than the US, along with less progressed business cycle expansions. In the US case, leading economic indicators have continued to suggest future growth. In 89% of cases since 1990 when US equities have posted corrections amid rising leading indicators, subsequent annual returns were positive. This is above the 56% of all cases. Nonetheless, we see the progression of Fed tightening in an aging expansion as arguing for higher quality portfolios with larger shares of defensive fixed income. Accordingly, our last two asset allocation changes this year moved in this direction, and we would expect further eventual moves in the same direction in 2019.